offer in compromise

If you owe money to the Internal Revenue Service (IRS), you know how stressful of a situation it can be. However, you do have options that can help you erase your debt and enjoy a clear conscience, free from the burdens of financial obligation. The IRS may consider working with you to formulate an offer in compromise (OIC), which can reduce your tax bill to a mere percentage of the original amount owed. Although there is no legal obligation for the IRS to accept an OIC to settle a tax bill, they are required to seriously review any properly submitted request. Additionally, if your OIC is not approved, you have the recourse of requesting a hearing with the IRS Appeals Office.

How to Qualify for an OIC

Everyone would like to settle their tax bill for a fraction of what they owe. The IRS does not grant an OIC to anyone wishing to shirk their financial responsibility to Uncle Sam. There are certain circumstances that must be met in order for the IRS to consider granting an OIC.

Doubt of liability is one such condition that may qualify you for an OIC. Essentially, this means that there are genuine factors in existence which cast suspicion upon the validity of the debt in question. If the debt has already been deemed valid in a court of law, or is valid under current tax code, there is no credible doubt of liability to pursue. To reasonably support a claim of doubt, you must submit supporting... ...read full post

Tax season strikes fear in the hearts of many, especially those who know they will have an excessive bill due on April 15. In addition, there are many people who, for any number of reasons, may not have paid a tax liability in previous years, have not filed returns or received notice from the Internal Revenue Service that a previous year’s return had an error that led to money owed. There is hope, however, that some of the tax burden can be lessened through what the IRS calls an Offer in Compromise.

Offer in Compromise

In some cases, the IRS will accept as little as one percent of the amount owed on a tax bill from taxpayers who qualify for an Offer In Compromise. In order to qualify, the taxpayer must:

Demonstrate that collecting the tax bill is in doubt, both now and in the future. This is a process known as “doubt as to collectability.”

Provide evidence that paying the bill would be unfair, inequitable or cause economic hardship for the taxpayer.

Demonstrate that the tax liability assessed is incorrect, otherwise known as “doubt as to liability.”

In order to show an incorrect assessment, the taxpayer must file Form 656-L, and some experts say that this option is often more difficult to pursue when requesting an Offer in Compromise.

The complexity of bureaucracy creates headaches for about any third party participant. A person that finds themselves embroiled in that complexity will typically want to find legal representation to work through it. Dealing with the IRS or the government requires a very specific body of knowledge. Mistakes can result in even more time and money spent on the process. Thus, it is best to get an experienced professional involved early in the proceedings. A great example is appealing the rejection of an Offer of Compromise with the IRS.

* What Is The Offer Of Compromise?
Simply put, an Offer of Compromise is a settlement with the IRS that comes in three forms. Instead of the full amount, the taxpayer agrees to make a single lump sum payment in exchange for a wipe of their original tax liability. The three forms the IRS recognizes are Doubt as to Liability, Effective Tax Administration, and Doubt as to Collectability. The IRS may decline an Offer of Compromise based on financial analysis of the applicant. The ability of the taxpayer to pay their obligation is measured by their reasonable collection potential (RCP).

In the event that the Offer of Compromise is rejected, the taxpayer does have the right to appeal the IRS's decision.

* The Requirements For An Appeal
Appealing a rejected Offer of Compromise can be a difficult process and there are specific criteria that must be met to appeal at all.... ...read full post

When you fall behind in paying your taxes, you can sometimes eliminate or greatly reduce your total tax debt with an IRS offer in compromise. To successfully submit such an offer, you have to prove that you do not have the ability to pay the full debt or doing so creates significant financial hardship. Each taxpayer’s case is individually considered based on their:

There are two issues to consider on tax debt. The first is that if you have not filed taxes or filed an incorrect or fraudulent return, the statute on the tax due does not begin until the tax is assessed. The IRS can pursue taxes in such cases once the issue is discovered for up to ten years after the tax is assessed. However, if you have filed correct returns on time, there is a 10-year period for their collection. For example, taxes filed and owed in 2003 will expire in 2014, ten years after the tax debt was incurred. This is called by the IRS the Collection Statute Expiration Date, or CSED.

When an Offer is Possible

The IRS basically looks at an offer as a way to collect as much tax as they can before the statute of limitations becomes effective. They evaluate the assets you have (which they... ...read full post

The offer in compromise program has more than any other IRS debt reduction program the ability to generate wide-spread interest. And rightly so, if you do qualify for the program you can actually greatly reduce the amount of money you will be on the hook for. The actual percentage will vary but in a nutshell if you qualify for the OIC the IRS will accept reducing the debt by a substantial amount.

The exact amount will depend on many different factors but first and foremost you must find out if you qualify for the program.

Hurdles taxpayers face when attempting to qualify for the Offer In Compromise program:

OIC problem 1 - you make too much money

It's going to sound strange but the main reason most do not qualify for the Offer In Compromise is that they make too much money. Thinking it through thought it makes sense. The IRS is only going to accept less on the tax debt if it feels that a taxpayer will never be able to pay the original amount owed. Even if it will take many years to pay the debt off if the IRS thinks you can eventually do it than they are not going to play ball. Some individuals in a real bind may think they can quit their job to show they have no income but that is not allowed. Being fired or laid off may work along those lines but before doing anything drastic explore the many alternative the OIC with an attorney.

This is a type of offer in Compromise where the taxpayer is agreeing to offer the IRS money in exchange for canceling the taxpayers outstanding debt. This type of proceeding will help the taxpayer cancel out his outstanding tax debts. This proposal may be denied or rejected by the IRS . The majority of offer in compromise applications are returned or rejected while 16% are accepted. If you do not follow the rules and guidelines set forth by the IRS for your offer in compromise than the full amount will be reinstated.

Basis of the Offer In Compromise Agreement

There are three areas in which a taxpayer can request an offer in compromise agreement These include:

Doubt as to Collectibility, Doubt as to Liability, or Effective Tax Administration

Doubt as to Collectibility means that the taxpayer does not have the availability of funds to pay the full amount of taxes owed. When an offer in compromise is requested it is usually that the vast majority of taxpayers do not have the money to pay. Alternatives to an offer in compromise based on doubt as to collectibility is the primary reason that the vast majority of taxpayers request an offer in compromise. Alternatives to the offer in compromise include installment agreement, a partial-pay installment agreement, or being declared not currently collectable.

If you owe a large amount of back taxes or are faced with a debt this year that you feel that you are unable to pay, it can be stressful, to say the least. The longer that you put off paying the IRS, the more stressful it will get. The worst thing that you can do in this type of situation is to ignore correspondence from the IRS, because this will set other legal proceedings in motion against you to collect the debt. You could end up having your wages garnished or a lien put on your property, in serious cases. Using a tax lawyer is recommended when you don't know where else to turn, because they can help you find ways to settle your debt. One of these options is known as an Offer in Compromise.

It's important to understand that the Offer in Compromise program is not an option for all taxpayers. You will have to prove that you meet the requirements to qualify for this debt settlement options, with the help of your lawyer. It's estimated that only 1% of offers that are submitted are actually accepted by the IRS, which is why it's not recommended to attempt this on your own. Your individual financial situation will need to meet the requirements as set forth by the IRS.

To qualify for the Offer in Compromise option, you will have to prove that there is either doubt as to liability, or doubt as to collectability of your... ...read full post

Many people from all walks of life can end up with unwanted attention from the Internal Revenue Service. From the average Joe to self employed professionals to officers in large corporations. Even the odd politcian here and there ends up in the spotlight for serious tax problems.Further more tax problems also come in all shapes and sizes with many causes – everything from not filling, filling incorrectly, owing back taxes, payroll tax problems or even criminal tax evasion.

The one thing troubled taxpayers have in common is not their problems but the solution. IRS Tax Lawyers. IRS tax lawyers have the knowledge and experience to get federal tax problems back under control.

It’s important to note not every tax problem is the same, not every resolution will be the same, but overall there are a few main programs tax lawyers will relay on for many cases and they include most notably the offer in compromise, innocent spouse relief, installment agreements, currently not collectable or hardship status, penalty abatement, bankruptcy protection and reasonable cause.

A skilled IRS tax attorney will know which of these programs will be the correct choice depending on the circumstances the taxpayer is in. Many people have seen TV commercials advertising settling huge tax debts for “pennies on the dollar” however in most cases the tax payer will not qualify for such a program. However an attorney will be able to negotiate to either reduce the debt down or break the amount into payments, or delay the collection... ...read full post

Learn The Truth About The OIC Program

By now, most troubled taxpayers looking for a way to resolve their IRS debt have seen commercials from large tax debt relief services claiming taxpayers paid tens of thousands of dollars by paying only pennies on the dollar. Reactions to these commercials by taxpayers vary from "Wow I wont have to pay all this tax debt" to "It's scam no one really gets out of paying that much money to the IRS".

The actual truth about the "Pennies on the dollar" is somewhere in the middle.

While it is true some taxpayers can negotiate their tax debt by paying only pennies on the dollar with the offer in compromise program, the IRS has a very strict set of rules and a small percentage of taxpayers will actually qualify for the OIC program.

To help understand the Internal Revenue's reasoning and motivation behind the OIC program it's important to remember the IRS is not allowing a negotiated settlement because they want to be nice. The IRS is accepting debt settlement offers for less than the amount owed because they feel they will either they will get their money faster, or that they would not otherwise be able to collect any funds at all.

To Qualify for an Offer In Compromise the taxpayer (or their tax attorney) must show either of the following:

Doubt of Collectability

- Doubt of collectability means the amount of tax liability is correct but the taxpayer will be unable to ever pay the full amount... ...read full post

As an IRS tax attorney, I recently have had a number of questions about whether or not the IRS can levy on Social Security benefits. Many people are under the impression that the IRS cannot take your Social Security benefits. However, just the opposite is true. The IRS can take your Social Security to satisfy a tax debt. In fact, not only can the Federal Payment Levy Program allow the IRS to dip into some Social Benefits paid to you, but it can also take money that you’ve received from:

- Federal employee retirement annuities,

- Federal payments made to you as a contractor/vendor doing business with the government (including Defense contracts),

- Federal employee travel advances or reimbursements,

- And some federal salaries.

If you have questions about the IRS taking your Social Security benefits or any other IRS related questions, please contact Tax Attorney Mary E. King at (941) 906-7585 for your free consultation.

Over the years as I have been representing clients who have IRS problems, the IRS has been strict in its official requirements for accepting an Offer in Compromise (OIC). However, over the past year, with the downturn in the economy, the IRS has relaxed its unofficial position on its requirements for accepting an OIC, as well as other tax debt settlement options. Therefore, I have seen more taxpayer clients who have been able to qualify for an Offer in Compromise.

Generally speaking, an Offer in Compromise is where the IRS accepts less money than the taxpayer owes to settle their outstanding liability with the IRS. The IRS will only accept an OIC when all other tax collection alternatives have been exhausted. Other IRS tax collection alternatives may be a short extension of time to pay, an installment agreement (making monthly payments until the debt is paid in full), full payment of the debt or hardship status. Hardship status is where the taxpayer is unable to pay anything against their tax liability at the present time. It is usually a temporary solution due to unemployment or illness. Finally, a taxpayer may qualify for a bankruptcy discharge of the tax liability.

When the IRS considers an OIC, it is looking at the taxpayer’s Reasonable Collection Potential (RCP). The RCP is how the IRS determines whether or not a taxpayer has... ...read full post